There are many desirable new build developments in London, leading would-be buyers to seek out mortgages for new build property. Unfortunately, borrowers are often surprised to find out that this isn’t always as straightforward as they might hope. Mortgages for new build properties can actually be harder to arrange, particularly in the London area, because it’s hard to make accurate comparisons for value.
As such, it’s usually very difficult to get 80% loan to value (LTV) on a new build property. Most lenders will restrict the LTV to 75%, which can be problematic when the property value is high. I recently assisted a client experiencing this problem.
My client, a successful banker, was looking to purchase a new build flat for £2million, and only wanted to place a 20% deposit, creating a LTV of 80%. However, he had recently been promoted, so his recent payslips did not reflect his new salary. His income was also heavily bonus based, so he needed a lender who could accept virtually all of his bonus when calculating his affordability; most lenders will only use around half of an applicant’s bonus.
He was therefore struggling to find an appropriate lender, meaning he would lose the significant deposit he had already placed if I did not move quickly. Fortunately, I have significant experience in arranging mortgages for bankers with large bonuses. I knew that private and investment banks would be more likely to consider cases like this, because they take a more holistic approach.
I therefore approached a private bank and was able to secure terms for the facility he needed—that is, 80% LTV—at a 2-year fixed rate of 1.65%. To keep my clients monthly payments smaller, I was also able to extend the term of the loan to 31 years. As far as mortgages for new build properties go, this was an excellent result.